Fiscal Stimulus Vs Fiscal Consolidation

The Finance Minister II speaks:

"Malaysia's recovery from the global economic crisis were fuelled by positive growth registered by various sectors and not solely due to the accelerated implementation of the RM67 billion economic stimulus package, says Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah…He said the Opposition claims that Malaysia's 2009 "better than expected" fourth quarter economic performance was the direct result of the whopping RM67 billion stimulus package was totally baseless."

Depending on your ideological point of view, he’s fortunately or unfortunately right. If you recall my 4Q2009 GDP post, there’s a difference in the public sector contribution depending on how you calculate growth.

Based on Malaysia’s usual year-on-year method, there was positive growth in public consumption and investment. But looking at the international standard of quarter-on-quarter, seasonally adjusted data, then public consumption was negative. There’s no breakdown yet of public and private investment, but on balance I suspect that the total government contribution to growth was only mildly positive.

Whichever way you look at it, there’s no question that GDP growth on the demand side in 4Q2009 was primarily driven by the external sector (log annual changes and seasonally adjusted annualised log monthly changes; 2000=100):